Private credit lenders are in discussions to provide $4.5bn in debt financing for Sycamore Partners’ potential buyout of Walgreens Boots Alliance, as part of a plan to break up the pharmacy chain into separate business units, according to a report by Bloomberg.
The report cites unnamed sources familiar with the matter as revealing that private credit firms, including HPS Investment Partners and Ares Management, are among those vying to finance what would be one of the largest leveraged buyout (LBO) debt deals in over a decade.
Sycamore, known for its break-up investment strategy, previously applied a similar playbook with Staples. The firm’s plan for Walgreens involves splitting up its business segments and financing them individually. However, sources caution that the deal remains in flux, with financing discussions at an advanced stage but still subject to delays or potential collapse.
The private credit portion forms part of a $12bn debt package that Sycamore is assembling to fund the deal, which could value Walgreens at close to $20bn. In addition to direct lenders, investment banks such as Citigroup, Goldman Sachs, JPMorgan Chase, UBS, and Wells Fargo are also competing to provide financing, Bloomberg previously reported.
HPS is taking the lead on a $2.5bn first-lien term loan for Shields Health Solutions, Walgreens’ specialty pharmacy division. This six-year private loan is reportedly being discussed at a margin of around 6 percentage points over the benchmark rate, with Goldman Sachs Asset Management and JPMorgan also participating.
